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Sections 89-119 of the Negotiable Instruments Law

Notice of Dishonor (Definition)

To bring either verbally or by writing, to the knowledge of the
drawer or indorser of an instrument, the fact that a specified
NI, upon proper proceedings taken, has not been accepted
or has not been paid, and that the party notified is expected
to pay it
notice given by the holder or his agent to a party or
parties secondarily liable that the instrument was
dishonored by non-acceptance by the drawee of a bill, or
by non-payment by the acceptor of a bill or by nonpayment by a maker of a note.

NOTE: A notice given by a notary public is called PROTEST


Sec. 89. To whom notice of

dishonor must be given.
Except as herein otherwise provided, when a negotiable
instrument has been dishonored by non-acceptance or
non-payment, notice of dishonor must be given to the
drawer and each indorser, and any drawer or indorser to
whom such notice is not given is discharged.
(GENERAL RULE: MUST be given to drawer and to each
indorser, and any drawer or indorser to whom such notice is
not given is discharged
EXCEPTIONS: Sections 109, 111, 112, 114, 115, 116 and

Sec. 89 is the general rule and the

same does not apply in the following:
When there has been waiver of notice (Sec. 109);
When there has been waiver of protest (Sec. 111);
When notice is dispensed with (Sec. 112);
When notice need not be given to drawer (Sec. 114);
When notice need not be given to indorser (Sec. 115);
When notice of non-payment where accepted refused (Sec.
When prior holder omitted to give notice and the NI is in the
hands of a subsequent holder in due course (Sec. 117).

A borrowed money from C, but C does not trust A. C then
suggests for A to ask B to execute a promissory note with C.
B agrees. C then transferred the instrument to D. D then goes
to A for payment but A is already bankrupt. D then notifies C
but he is also bankrupt. D then goes after B who argues that
he is discharged for he was not given a notice of dishonor.
Is B correct?
No. When he signed as an accommodation maker, he
became primarily liable on the instrument and thus, he is not
entitled to notice of dishonor.

Although the indorser to whom notice is not given is
discharged, he is still liable for breach of warranties
pertaining to the instrument.
The holder is not required to notify ALL the indorsers.
The loss of a note does not excuse compliance with Sec. 89.

When instrument considered to

be dishonored
An instrument is dishonored:
(1) if it is not accepted when presented for acceptance; or
(2) if it is not paid when presented for payment at maturity; or
(3) If presentment is excused or waived and the instrument is
past due and unpaid.

1. Given by holder or his agent, or by any party who
may be compelled by the holder to pay (sec. 90)
2. Given to secondary party or his agent (sec. 97)
3. Given within the periods provided by law (sec 102)
4. Given at the proper place (secs. 103 & 104)

Parties Entitled to Notice

Only the drawer and indorsers or their agents are entitled to
notice of dishonor.
In case of non-acceptance of a bill- to persons secondarily liable,
namely, the drawer and indorsers as the case may be.
In case of non-payment (both bill and note) indorsers.

Accommodation indorsers are included

A joint maker, though a surety, is not an indorser and is primarily
liable and, therefore, not entitled to notice of dishonor.
Even an accommodation maker is not entitled to notice.

Nyco Sales Corporation v. BA

Finance Corporation [1991]
At the request of F, R corporation (assignor) granted X discounting
privileges which R had with E corporation (assignee). X issued a postdated check payable to R which, following the discounting process,
indorsed the check in favor of E. Thereafter, E issued a check payable to
R which indorsed it in favor of X. X then made use of and negotiated the
Accompanying the exchange of checks was a deed of assignment
executed by R in favor of E with the conformity of X. Under the said
deed, subject of the discounting was the aforecited check. At the back
thereof, was a suretyship agreement whereby F unconditionally
guaranteed to E the full, faithful and prompt payment and discharge of
any and all indebtedness of R.

The check, however was dishonored by the drawee-bank

upon presentment for payment. E immediately reported the
matter to F who thereupon issued a substitute check in favor
of E which was again dishonored.
Despite repeated demands, R and F failed to settle the
obligations with E, thus prompting the latter to institute an
action in court.
For its defense, R argues among others, that it was actually
discharged of its liability over the substitute check when E
failed to give its notice of dishonor.

Issue: Is the assignor liable to its assignee for its dishonored

Held: Yes. An assignment of credit done onerously has an
effect similar to that of a sale. If there be any breach of the
warranties provided in Art. 1628, the assignor-vendor should
be held answerable therefor. E is actually enforcing the deed
of assignment and the check covered thereby is merely an
incidental or collateral matter. This particular check merely
evidenced the credit which was actually assigned to E. R is
being held liable for both checks.

It is only what is represented by the said checks that R is

being asked to pay. As long as credit remains outstanding, it
shall continue to be liable to E as its assignor.
The dishonor of an assigned check simply stresses its
liability and the failure to give notice of dishonor will not
discharge R from such liability. This is because the cause of
action stems from the breach of warranties embodied in the
deed of assignment and not from the dishonoring of the
check alone.

Gullas vs PNB
Treasury warrants were indorsed by Gullas and Lopez.
These were presented for encashment by PNB.
Subsequently, these were dishonored by the Insular
Treasurer. Because of the dishonor, PNB applied Gullas
deposit in the PNB for payment of the warrant.
Is the application of the deposit of Gullas properly

A notice of dishonor is necessary to charge an indorser &

that the right of action against him does not accrue until the
notice is given.
As a general rule, a bank has a right of set off of the deposits
in its hands for the payment of any indebtedness to it on the
part of a depositor. However, prior to the mailing of notice of
dishonor & without awaiting any action by Gullas, the bank
made use of the money standing in his account to make
good for the treasury warrant. Gullas was merely an indorser
& notice should actually have been given to him in order that
he might protect his interests.

Acceleration Clause
If clause is optional to the holder:
The bringing of an action against the maker and indorsers
constitutes a valid exercise of option and a valid notice of

If clause is automatic:
Notice of dishonor must be given at once
Not sufficient to give it upon commencement of action

Section 95 and 96 NIL

Form and Contents

Sec. 95. When notice sufficient.

A written notice need not be signed, and an insufficient
written notice may be supplemented and validated by
verbal communication.
A misdescription of the instrument does not vitiate the
notice unless the party to whom the notice is given is in
fact misled thereby.

Sec. 96. Form of notice.

The notice may be in writing or merely oral and may be
given in any terms which sufficiently identify the
instrument and indicate that it has been dishonored by
nonacceptance or nonpayment. It may in all cases be
given by delivering it personally or through the mails.
(NOTE: The word may in this section has been construed
to mean must.)

Form of Notice
Notice of dishonor may be in writing or merely oral.
Notice may thus be given by telephone, provided it be
clearly shown that the party notified was really
communicated with, that is fully identified as the party at
the receiving end of the line.
Notice may also be sent by telegraph.
Notice must be in a language that will inform the
addressed party that the instrument has been duly
presented (Campos)

Contents of the notice

Whether written or oral, the notice must set forth:
(1) The identity of the instrument;
(2) The fact that it has been dishonored by nonacceptance or non-payment; and
(3) A statement that the party giving notice intends to
look to the party addressed for payment.

Modes of delivery
Personal service
There must be actual personal service, or
An ordinary intelligent and diligent effort to make personal
Through the mails
Through the telephone
Party to be notified must be fully identified as the party at
the receiving end of the line (Campos)

When notice is still sufficient

(Section 95)
GENERAL RULE: Defect in notice shall not invalidate it.
Section 95 contemplates the following cases:
Lack of signature or insufficiency
Failure to state in the notice of dishonor the date of
making and maturity of a note, and the name of the
payee does not invalidate the notice.

Misdescription of instrument
Neither does misdescription of the instrument, such as,
as to the amount, or the date, or the names of the
parties, or the date of maturity, or other defect vitiates the
notice unless it misleads the party to whom it is sent.
Lack of statement of recourse to indorser
A notice of dishonor need not state that the sender looks
to the indorser for payment, where it may be inferred that
the indorsee looks to the indorser, and no other inference
could reasonably be drawn from the notice.